Goldman's new gold target: Why the Wall Street bank is saying it's early to buy the yellow metal

By Nora Redmond

Gold prices declined early on Friday.

Goldman Sachs has lowered its forecast for gold prices, citing the potential for more Federal Reserve interest-rate hikes.

The investment bank now expects bullion (GC00) to settle at $4,150 a troy ounce by the end of 2026, down from a previous target of $4,650.

Gold's continuous contract fell 0.8% to $4,082 early Friday, down considerably from a record high of over $5,500, reached only in January.

Commodities strategists Lina Thomas and Daan Struyven wrote in a Thursday note that portfolio positioning is likely to adapt to the central bank's recent hawkish shift. Its stance started to tilt due to persistent inflation as the war in Iran led to a spike in energy prices, leading to worsening cost-of-living pressures.

Bullion and interest rates generally have an inverse relationship, where when rates rise, gold prices tend to decline.

Markets are currently pricing in a 71% chance of the Fed raising rates by one-quarter point at its meeting in December, according to FedWatch. A possible second hike next year is also widely anticipated.

However, Goldman sees gold prices picking up in 2027, with the bank expecting prices to reach $4,800 an ounce next year, still down from its prior projection of $5,400.

Thomas and Struyven noted that the recent bond-market rally helped to bring the market's pricing of future hikes closer to the bank's forecasts. Even though bond yields have declined, it looks like the Fed still may take an aggressive response - which would mean the boost gold prices often get from declining yields likely wouldn't materialize.

The strategists' base case assumes that the central bank's hawkish shift and a hike next month will help to contain investors' concerns over a possible debasement of the dollar DXY. Similarly to rates, when the dollar strengthens, gold often weakens.

"We therefore assume macro-policy hedge demand for gold - reflected in call-option demand - normalizes toward its historical average rather than returning to the elevated levels seen earlier this year," they wrote.

For Thomas and Struyven, the current setup is similar to 2022's, when gold prices rose more gradually because of the contrast of strong demand from central banks for the metal with investor concerns over higher rates.

Goldman economists hold that if central banks begin to loosen policy in late 2027 through 2028, prices will likely increase again as their buying of bullion competes with demand from private investors.

For longer-term investors, the strategists wrote that gold's current consolidation could offer an attractive entry point.

-Nora Redmond

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11-06-26 0747ET